An introduction to recording business expenses paid out of your own pocket and mileage travelled in your own car into FreeAgent.
This is the Expenses screen on FreeAgent.
Where can I find the Expenses screen?
If your business is a sole trade, and you have no staff, just select Expenses.
If you have staff, or your business is a partnership or limited company, you'll find Expenses under a menu called My Money.
Why "My Money"?
Because it's important to remember, if you're employed by a limited company, that the money the company earns doesn't all belong to you personally. That applies even if you're the only director and only shareholder in the company. The money the company receives in sales revenue belongs to the company, and there are only three ways you can take money out of the company.
One is for it to pay you a salary for the work you do as an employee or director. The second is for it to pay you a dividend on the shares that you own in the company. And the third way is for it to pay you back money that it owes to you.
That's it.
There are no other legitimate ways for the company to pay you money. If you take out more than you're owed, there may be extra tax to pay.
So this is why it's important to keep your money separate from the company's.
Out-of-pocket expenses
One way in which the company might owe you money is if you spend money out of your own pocket on goods and services for the business. Perhaps you paid for a train ticket for business travel, on your own personal credit card. Or maybe you travelled on business in your own car, as opposed to a company car.
The Expenses screen in FreeAgent is where you would record these transactions.
The software then keeps a record for you of how much the company owes you, so that it can pay you back for the correct amount. You can see here there's a running total of how much the company owed at different times (but see below for the "All" view).
Any money that the company owes you for business expenses you've incurred personally will show in your accounts under Expense Account, like this.
Who can I record out-of-pocket expenses for?
You can record expenses and mileage incurred by any user who you've set up on FreeAgent. So that's useful if you need to record costs incurred by your staff, whether your business is a limited company or not.
And you can choose which period you want to see expenses for. Please note, you won't see a running total if you choose to view "All" expenses. Choose one of the date views (e.g. a month, an accounting year) if you want to see a running total.
You can also then record the money paid back to you by the company for expenses you've covered personally.